IRS reports a bill of $23.5 BILLION for the home buyer tax credit

Will the Obama Administration and Congress concoct yet another "reward the irresponsible" program when $7.3 billion of no interest loans are not paid back in a timely manner? When are our children and grandchildren afforded an opportunity to catch a break?  

Diana Olick
CNBC Real Estate Reporter
September 3, 2010

New reports are rolling around Wall Street and Washington today that the Obama Administration is considering yet another economic stimulus package; this round would be for small businesses. This comes just one week after increased chatter about more government stimulus for housing.

Congress returns the week of September 13th, and as Democrats face an uncertain election this November, you know they're going to be looking to make average Americans feel more secure about their finances.

But how much has housing stimulus really helped?

Through July 3, 2010, the IRS reports a bill of $23.5 BILLION for the home buyer tax credit, according to a letter dated yesterday (September 2nd) from the Government Accountability Office (GAO) to Rep. John Lewis, Chairman of the House Ways and Means Committee's Subcommittee on Oversight. $16.2 billion for the first time and move-up credits and $7.3 billion for interest-free loans which recipients will begin repaying in January.

The Department of Housing and Urban Development has also already allocated nearly $6 billion for the Neighborhood Stabilization Program, which gives state and local governments and non-profit housing developers funds to acquire property, demolish or rehabilitate foreclosures and offer assistance to low- to middle-income homebuyers for down payments and closing costs. In the coming weeks it will add $1 billion to that. Just this week HUD Secretary Donovan gave NSP grantees a leg up over investors, by providing a first right of refusal for those grantees to buy foreclosed homes.

The talk around Washington is for yet another home buyer tax credit, this time perhaps for short sale and foreclosure buyers. Unfortunately every time we get a short-term stimulus, we get an inevitable drop off in sales and prices, as we're experiencing now. Yes, we saw a mini burst of buying from credits last fall and this spring, but the overall numbers are still way down, and inventories are still far too high.

The one steady in gauging housing is confidence, and until we get that back, sales will remain weak for the foreseeable future.

Government stimulus, arguably, sells houses, and we need that to bring down our currently record-high inventories.

But Government stimulus is also temporary, and everyday buyers and sellers recognize that, which doesn't add to their already faltering confidence.

U.S. Government Accountability Office

First- Time Homebuyer Credit (FTHBC)

Through July 3, 2010, IRS reported the following: About 1 million claimants claimed $7.3 billion in interest-free loans through the Housing Act provision. These claimants will begin repaying their loan beginning next tax filing season, which starts in January 2011.

These numbers in particular are likely to increase because IRS is still processing FTHBC returns and this version can be claimed on tax returns filed during the 2011 filing season.
GAO Report

Congress approves 3 month extension to close..just in time, pending home sales down 30%

J.W. Elphinstone, AP Real Estate Writer, Thursday July 1, 2010

NEW YORK (AP) -- Homebuyers worried about closing their house purchases before the tax credit cutoff can relax after the government extended the deadline.

Congress sent President Barack Obama a plan to give homebuyers an extra three months to finish qualifying for federal tax incentives that boosted home sales this spring. The House approved the measure on Tuesday and the Senate approved it Wednesday night. Obama is expected to sign it shortly.

The legislation gives buyers until Sept. 30 to complete their purchases and qualify for tax credits of up to $8,000 for first-time buyers and $6,500 for existing owners who move. Under the original terms, buyers had until April 30 to get a signed sales contract and until June 30 to complete the sale.

The bill only allows people who already have signed contracts to finish at the later date. Nearly 3 million taxpayers claimed the tax credits through May 22 at a cost of more than $21 billion, according to the Treasury Department.

Congress also approved the National Flood Insurance Program, which buyers need to qualify for a mortgage for a home located in a flood zone.

"We're elated," said Ron Phipps of Phipps Realty in Warwick, R.I.

About 180,000 buyers needed the tax credit extension, the National Association of Realtors estimated.

A lot of the holdups came from the mortgage approval process. Lenders were inundated with buyers rushing to close their sale and qualify for the tax credit.

"It wasn't issues with qualifications or bad appraisals," Phipps said. "The overwhelming demand simply bogged down the system." Phipps also noted that without the extension, some buyers would have walked away from their sales. Some buyers put clauses in their contracts that let them out of the deal if they couldn't close before the June 30 deadline.

Matthew Morneault, 24, could have been one of them. A member of the Maine Air Force National Guard, Morneault is counting on the tax credit money to make roof and patio repairs on the four-bedroom house he's buying in a short sale, where the bank agrees to let a home sell for less than what is owed on it.

He has been ready to close on the $154,000 home in Bangor, Maine, for two months and was ready to write off the deal if he didn't close in time for the tax credit. He is waiting for the seller's bank to provide documents to the title company to show the property is free of liens.

"The extension is making me stick it out a little longer," he said.

National Association of Realtors Report on Pending Sales

 

WASHINGTON (July 1, 2010) – Following a surge driven by the home buyer tax credit, pending home sales fell with the expiration of the deadline for qualified buyers to sign a purchase contract, according to National Association of Realtors®.

The Pending Home Sales Index,* a forward-looking indicator, dropped 30.0 percent to 77.6 based on contracts signed in May from a reading of 110.9 in April, and is 15.9 percent below May 2009 when it was 92.3. The falloff comes on the heels of three strong monthly gains as home buyers rushed to take advantage of the tax credit.

The data reflects contracts and not closings, which normally occur with a lag time of one or two months. However, many closings have been delayed recently from a rush of buyers into the system and slow processing of short sales, in addition to the heavy volume and a more thorough loan underwriting process. As many as 180,000 buyers who signed contracts by April 30 may have missed the June 30 closing deadline for the tax credit. However, Congress passed legislation yesterday to extend the deadline for delayed contracts and President Obama is expected to sign.

NAR chief economist Lawrence Yun said, “Consumers are rational and they rushed to meet the tax credit eligibility deadline in April. The sharp decline in contract signings in May is a natural result with similar low levels of sales activity anticipated in June,” he said. “Surprisingly, though, some local markets such as Portland, Maine, and Jacksonville, Fla., actually experienced an increase in contract signings from a year ago without the tax credit.

Grandpa: I have nothing else to offer as it "is a natural result".

Friday Funnies

Congress not likely to extend Homebuyer tax credit

closing date for at least 1,295 inmates

11 of the 10,282 taxpayers who obtained tax credits

for purchasing the same homes that other taxpayers

were using to claim the credit themselves

2,555 taxpayers took advantage of the early bird special

and received $17.6 million on home purchases that

occured before the program launched

Trillions in stimulus and Q1 GDP 2.7%

Mr. Blankfein, what is the likelihood of

Goldman Sachs not conducting business as usual

given the financial reform bill?

Mr. Dimon; With the recent congressional agreement on

financial reform, how effective was JPMorgan's $7.6 million
lobbying expenditures during 2009-2010?

Investigator: Inmates get homebuyer tax credits...U.S. Government out of control!

By STEPHEN OHLEMACHER (AP)

WASHINGTON — Nearly 1,300 prison inmates wrongly received more than $9 million in tax credits for homebuyers despite being locked up when they claimed they bought a home, a government investigator reported Wednesday.

The investigator said 241 of the inmates were serving life sentences.

In all, more than 14,100 taxpayers wrongly received at least $26.7 million in tax credits that were meant to boost the nation's slumping housing markets, said the report by J. Russell George, the Treasury Department's inspector general (IG) for tax administration.

Some taxpayers received the credit for homes purchased before the tax break was started. In other cases, multiple taxpayers improperly used the same home to claim multiple credits. Investigators found one home that was used by 67 taxpayers to claim credits.

"This is very troubling," George said. "Congress created and modified the homebuyer credit to stimulate the economy and help taxpayers achieve the American dream, not to line the pockets of wrongdoers."

The Internal Revenue Service says it is taking steps to get the money back. The agency noted that more than 2.6 million taxpayers claimed the tax credit through April — claiming $18.7 billion in credits — with only a tiny fraction going to prison inmates or other scofflaws.

"A very small number of payments were made to prisoners incorrectly, which the IRS is now taking all steps to recapture and to prevent going forward," the IRS said in a statement. "The IRS will follow up on every instance of an improper prisoner payment and take swift and appropriate enforcement actions."

The report blemishes an otherwise popular tax break that was sweetened once by President Barack Obama's economic recovery package and again when Congress extended it into the spring. The National Association of Realtors says the tax credit has generated 1 million new home sales that wouldn't have happened otherwise.

"Last year, we learned that children and persons who did not purchase homes were fraudulently claiming the first-time homebuyer credit," said Rep. John Lewis, D-Ga., chairman of the House Ways and Means oversight subcommittee. "Although I am pleased that the fraud identified earlier does not continue, I am concerned about prisoners claiming the credit."

An estimated 10,282 taxpayers wrongly received credits for homes that were also used by other taxpayers to claim the credit. Investigators were unable to quantify the amount of money they received, "but all indications are that the total will be in the tens of millions of dollars," the IG's office said in a statement.
Link to article

Grandpa:

 ...our grandchildren deserve so much more...and John Lewis is concerned about prisoners claiming the credit....concerned John, how about OUTRAGED!!

Incompetent

* Inadequate for or unsuited to a particular purpose or application
* Devoid of those qualities requisite for effective conduct or action

White House Extends and Expands

First Time Homebuyer Tax Credit